United States Fidelity Co. v. Martin

149 P. 1023, 77 Or. 369, 1915 Ore. LEXIS 127

• Court: Oregon Supreme Court
• Decided: June 29, 1915
• Status: Published

Opinions

Mr. Justice Burnett

delivered the opinion of the court.

If we should concede that the defendant had a right to demand of the plaintiff that it commence in its own name an independent suit to set aside the judgment which it afterward paid, still the answer of the defendant describing the petition he presented only states a conclusion of law. On the hypothesis that the plaintiff was compelled to accede to his request to commence a suit, he should have set forth the facts presented in the petition, so that the court here could determine as a matter of law whether or not the plaintiff was remiss in its duty to him in refusing to adopt the complaint presented. For all that appears in the answer, the complaint which he desired the plaintiff to subscribe was wholly insufficient for the purpose designed and would only have involved the plaintiff in further complications.

1, 2. Passing this point, however, we approach what we deem the vital question in the case, which is the force and effect of the Washington judgment. We remember that the findings of fact in the case are conclusive upon appeal unless the court on examination of the record contained in the bill of exceptions discerns that there is no evidence to support the findings. The first assignment of error is based upon the contention that the finding to the effect that the Washington action was settled before judgment therein was without foundation in the testimony. The proceedings of the Washington court in the action in question are in the record before us. They include the pleadings, the findings of the court, and the judgment. The complaint is for labor, capital, goods, wares and merchandise furnished by the plaintiff to the defendant between certain dates amounting to $767.67, and alleges that no part of the same has been paid, The amended answer consists of a denial of the complaint, and a further and separate defense alleging the settlement of the action after the commencement thereof and the execution of the writing already mentioned and counted upon by the defendant as a defense in the case at bar. The reply, after denying the allegations of the amended answer, further points out that the settlement had nothing to do with the defendant; that the plaintiff never at any time had any transactions with the Northwest Bill Posting Company, nor did he bring all action against that institution. It further avers that the plaintiff had a compromise agreement with, one Sheppard, the answering defendant here, wherein the latter agreed to pay the plaintiff $465 in March of the year 1911, together with all outstanding bills in Vancouver, Washington, against the defendant in that action; and that the plaintiff agreed that the action in question should not be prosecuted at that time but should remain until March, 1911, when, if the compromise agreement had not been carried out by Sheppard, the plaintiff should proceed to judgment in the action. The record of the trial in the Washington court recites that the cause came on to be heard on its merits; that the plaintiff appeared in person and by his attorney, George B. Simpson, that the defendant appeared by his attorney, J. B. Stapleton; and that after hearing the testimony of witnesses and argument of counsel for both parties the court made findings of fact. It is sufficient to say of these that they were favorable to the plaintiff in the action; that the redelivery bond had been executed by the plaintiff here; and, as to the settlement based upon the receipt already quoted, the finding is thus:

“That the receipt signed by the plaintiff and admitted herein as evidence is not conclusive and was contradicted and entirely discredited by the oral evidence of the plaintiff, and that said receipt was only accepted in settlement, upon condition that it he paid at maturity, and the other bills mentioned in plaintiff’s complaint be settled, which conditions have not been met.”

Upon these findings of fact the court entered conclusions of law to the effect that the plaintiff should have judgment against the defendant for $666.26, with interest amounting to $32.19, together with his costs, and should also have judgment against the plaintiff here as surety on the redelivery bond in the sum already stated. The judgment was entered accordingly against the defendant in the action and this plaintiff as surety on the redelivery bond.

It is written large throughout the pleadings and evidence in this case that the defendant Sheppard had notice of the pendency of the action and that he applied to the plaintiff for the redelivery bond to be used in that litigation. In furtherance of his undertaking to save this plaintiff harmless on its stipulation, he procured the receipt upon which he relies. It appears in evidence without dispute out of his own mouth that prior to the trial of the action he was notified by the attorney of record for the defendant that the aetion would be brought to trial. He testifies that he furnished to the counsel for the defendant there the writing already quoted, signed by Meach. The record shows that the answer was amended and the question of settlement raised upon the writing; that the defense was interposed based upon that instrument; that the identical proposition upon which the defendant here relies was litigated in the Washington court, where both parties were represented by their attorneys of record; and that the decision of that tribunal to which the parties submitted themselves was adverse to the contention of the defendant here. What, then, is the effect to be given to that judgment upon the question of settlement? The answer is found in Section 1 of Article TV of the Constitution of the United States:

“Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state.”

3,4. On the question involved, namely, whether or not the action had been settled, the judgment of the Washington court having jurisdiction of the persons and of the subject matter is conclusive as against anything here alleged by the defendant. To uphold the defense in face of such a record is to discredit the judicial proceeding of a sister state. It is hornbook law that a receipt is only prima facie evidence of its statements. It is equally primary learning that the consideration expressed in a writing may be inquired into: Section 798, L. O. L., subd. 3. It is not necessary to further speculate on the reasons'underlying the decision of the Washington court on this point, for we can well surmise that there was evidence before it, not only qualifying the terms of the settlement, but also the consideration upon which it was supposed to have been based. The instrument upon which he relies cannot be allowed to discredit the judicial determination of the Washington court. Such a holding would be in direct contravention of the mandate of the national Constitution already noted. It would be to uphold a private writing in the very face of a judicial record condemning it. The resulting situation, therefore, is that, on the record presented, the court of trial in the instant case could not lawfully reach any other conclusion except that the action had not been settled as claimed by the defendant Sheppard. The necessary deduction is that there was no evidence to sustain the finding of our Circuit Court to the contrary.

As before stated, it is unquestioned in the testimony that the defendant Sheppard had notice of the pendency of the Washington action from its conception; that he knew that the same was to be brought to trial; that to a certain extent he availed himself of the opportunity to interpose his defense; and that it was pleaded there. He states in his testimony that, having furnished the data to the counsel for the defendant in that action, he himself went away to another point in that state to attend to some other litigation, and hence was not present at the trial; but he does not pretend that he was lured away by any action of the plaintiff here. Having notice of the pendency of the action and that it would be brought to trial and being in position to urge the defense and to carry out the terms of his bond to save the plaintiff harmless, he is bound by the resulting judgment against the plaintiff here. In Carroll v. Nodine, 41 Or. 412 (69 Pac. 51, 93 Am. St. Rep. 743), the only notice given to the defendant indemnitor of the pendency of the action was that she was called as a witness and attended at the trial resulting in the judgment against her indemnitee, and it was there held that she was sufficiently vouched to make the judgment conclusive upon her. Again, in Astoria v. Astoria & Columbia Riv. R. Co., 67 Or. 538 (136 Pac. 645, 49 L. R. A. (N. S.) 404, 5 N. C. C. A. 442), this court held that, where the indemnitor has notice of the action and an opportunity to urge the defense, the judgment in that action is conclusive of the facts thereby established and cannot again be the subject of litigation between the indemnitor and the indemnitee. Mr. Justice McNajry, who wrote the opinion, adopts the following language in Oceanic Steam Nav. Co. v. Campania Transatlantica Espanola, 144 N. Y. 663 (39 N. E. 360):

“It is sufficient that the party against -whom ultimate liability is claimed is fully and fairly informed of the claim and that the action is pending with full opportunity to defend or to participate in the defense. If he then neglects or refuses to make any defense he may have, the judgment will bind him in the same way and to the same extent as if he had been made a party to the record.”

In Bridgeport Fire & Marine Ins. Co. v. Wilson, 34 N. Y. 275, the rule is thus stated:

“(1) "Where the covenantor expressly makes his liability depend on the event of a litigation to which he is not a party, and stipulates to abide the result; and (2) where the covenant is one of general indemnity merely, against claims or suits. * * In cases of the first class, the judgment is conclusive evidence against the indemnitor, although he was not a party, and had no notice, for its recovery is the event against which he covenanted.”

The court goes on to hold, however, that in eases of the second class, where the indemnitor had notice of the pendency of the action and had opportunity to urge his defense, he is bound by the result of the litigation. Again, in Village of Port Jervis v. First National Bank, 96 N. Y. 550, it is said:

“But if the party who is ultimately responsible has notice of the pendency of an action against his indemnitee and is given an opportunity to defend, and neglects it, he is still bound by the result of the action and estopped from controverting in an action subsequently brought against him by such indemnitee the facts which were litigated in the original action.”

In cases of the first class mentioned in Bridgeport Ins. Co. v. Wilson, the reason for notice failed, and the necessity therefor is obviated. This is applicable to the instant case in the following manner: The answering defendant assumed responsibility to the plaintiff for the result of the action in which it furnished the indemnity undertaking. He agreed to protect it from that particular action, and he is bound by his agreement irrespective of notice because he had notice from the beginning of the very proceeding against which he guaranteed the plaintiff. He subsequently assumed to intermeddle in the litigation. In a way he assumed the disposition of that action, and, having put his hand to the plow, he was bound not to turn back, but to continue his efforts to a successful conclusion. It is not pretended in his pleadings that he gave the plaintiff any notice of his transaction with Meach or of his settlement of the controversy until after rendition of the judgment. The plaintiff is not to blame if the labors of the defendant proved abortive. Moreover, the fact that the plaintiff, as he himself testifies, had notice of the purpose to bring the action to trial after the alleged settlement, puts him in the second class mentioned in Bridgeport Ins. Co. v. Wilson; and on account of that notice the judgment is conclusive upon him from any point of view. In brief, having undertaken to save the plaintiff harmless from the result of a designated action, it was incumbent upon the defendant from the beginning to accomplish that result. Not having done so, he is liable upon his obligation. The following precedents illustrate the doctrine more fully: Chamberlain v. Preble, 11 Allen (Mass.), 370; Rapelye v. Prince, 4 Hill. (N. Y.) 119 (40 Am. Dec. 267); notes to Ballentine v. Penn, 40 L. R. A. (N. S.) 698, 723, and Baltimore & O. R. R. Co. v. Howard County, 40 L. R. A. (N. S.) 1172; Chicago v. Robbins, 67 U. S. (17 L. Ed. 298); Robbins v. Chicago, 71 U. S. (4 Wall.) 657 (18 L. Ed. 427); Mayor v. Brady, 151 N. Y. 611 (45 N. E. 1122); Portland v. Richardson, 54 Me. 46 (89 Am. Dec. 720); Great N. Ry. Co. v. Akeley, 88 Minn. 237 (92 N. W. 959); Daskam v. Ullman, 74 Wis. 474 (43 N. W. 321); Davis v. Smith, 79 Me. 351 (10 Atl. 55); Woodworth v. Gorsline, 30 Colo. 186 (69 Pac. 705, 58 L. R. A. 417); Lovejoy v. Murray, 3 Wall. 1 (18 L. Ed. 129); Seattle v. Regan, 52 Wash. 262 (100 Pac. 731, 132 Am. St. Rep. 963); American Bonding Co. v. Dufur, 49 Wash. 632 (96 Pac. 160). In 38 Albany Law J. 507, there is an exhaustive and able discussion of this question by Judge Corliss, formerly of the Supreme Court of North Dakota, but now of the bar of this state.

5. Besides all this, by the other terms of his bond the defendant might be held to have waived all control over litigation of the question involved when he authorized the plaintiff to select any attorney of record to confess judgment against him on his liability; but upon this point we make no decision. In brief, we conclude that the judgment of the Washington court was conclusive upon the defendant as to the amount and fact of his liability to the plaintiff; that he cannot again litigate the matter of settlement of the action either directly or indirectly; and that as against that judgment he has no right to demand that the plaintiff here even nominally institute an independent suit to again litigate the questions there involved. He had free rein to operate in the proceedings in the action before the Washington court, and indeed took some measures there to prevent the judgment that ensued, but without avail. It is clear, and is not controverted, that nothing more can be done directly in the prosecution or defense of that action. The judgment there ripened into a finality, and the plaintiff here was compelled to pay it. Our statute, expressing the doctrine of the' full faith and credit clause of the national Constitution, says in Section 761, L. O. L.:

“The effect of a judicial record of a sister state is the same in this state as in the state where it was made.”

Final there, it is final here. We can inquire whether that tribunal had jurisdiction of the parties and of the subject matter, but further than that we cannot go. When these conditions appear, we must accept the determination of that court as conclusive without further inquiry. Such is the teaching of Foshier v. Narver, 24 Or. 441 (34 Pac. 21, 41 Am. St. Rep. 874). There the defendant was served with summons in Iowa in an action pending in a court in that state for the recovery of money due upon a promissory note. He suffered judgment to go against him there by default. An action to recover the amount of the judgment was instituted against him in Oregon. It appeared from the record that the Iowa court had jurisdiction of him and of the subject matter of the action, and he was denied the right to show in the court here that he had never signed the note; that he was not responsible for the instrument or the debt it represented; and that it was subscribed by a different person. The judgment was held to be conclusive even against the facts he offered to prove. The case of De Vall v. De Vall, 57 Or. 128 (109 Pac. 755, 110 Pac. 705), enunciates the same principle.

Having covenanted to save the plaintiff harmless from any judgment in the action wherein at his request it became a surety, the defendant formulated a plan, in the shape of the receipt mentioned, which he thought would effect the desired result, all without the knowledge of the plaintiff. At his instance that paper was pleaded in the action mentioned, and the matter was fully litigated with a result adverse to his contention. Having exhausted his resources in that case, he now urges that he is exonerated because this plaintiff did not inaugurate new and independent litigation on security of his choosing. In short, for his undertaking to the plaintiff he would substitute the agreement expressed in the Meach receipt without the knowledge of the plaintiff and would compel the latter to enforce it after he had failed. To countenance the defendant’s contention in the face of the judgment of the Washington court would be to say:

“We will not give faith or credit to that determination until we first shall have examined into what we assume to be the merits of the controversy there and ascertained for ourselves whether the decision is such as we would have rendered under the same circumstances. ’ ’

We are forbidden to do this by the national Constitution, as well as by section 761, L. O. L. The Circuit Court was in error when it discredited the judgment of the court of a sister state in favor of the writing upon which the defendant depends; especially when it was before that court for consideration in that very action upon the contention here urg'ed.

The decision of the Circuit Court is reversed and the cause remanded, with directions to that court to enter a judgment in favor of the plaintiff according to the prayer of the complaint.

Reversed. Rehearing Denied.